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22.12.2016 - Voice of CA presents - Updates
Thursday, December 22, 2016

I. Headlines Today    

  1. CBDT Circular: Clarifications on Indirect Transfer provisions under the lncome Tax Act. 1961  (Click for detail)
  2. CBDT asks I-T to ensure better collection of revenue arrears  (Click for detail)
  3. Next on Banks’ Agenda: New Accounting Norms  (Click for detail)
  4. Revised tax returns may come under scrutiny  (Click for detail)
  5. ST Notification: Seeks to amend Service Tax Rules, 1994 so as to allow a person located in non taxable territory providing online information and database access or retrieval services to a nonassessee online recipient to issue online invoices not authenticated by means of a digital signature for a period upto 31st January, 2017  (Click for detail)
  6. MCA prescribes format of forms to be filed before NCLT  (Click for detail)
  7. RBI Notification: No question will be asked for depositing above Rs 5000 in old notes; RBI withdraws old circular  (Click for detail)
  8. RBI slaps fine on 5 foreign banks for violating FEMA rules  (Click for detail)
II.  Direct Taxes Case Laws: 

1.  Laxmi Automatic Loom Works Ltd. Vs. DCIT, W.P.(C) 5036/2016, Date of Order: 05.12.2016, High Court of Delhi

Whether the assessee company was liable to pay capital gains tax on the assets transferred by it under the Modified Rehabilitation Scheme when its financial position was improving and it had shown profitability and availability of surplus funds?


Brief Facts:
The assessee company was engaged in textile machinery manufacture and became sick in 2001. The scheme of revival was for the same was sanctioned by the Board for Industrial and Financial Reconstruction (BIFR) in 2003. As per the scheme, the net worth of the company was to turn positive by 2005-06 and accumulated losses was to be finished by 2006. While on the contrary, there was a sharp decrease in the net worth of the company. Seeing this, BIFR reviewed and modified the rehabilitation scheme in 2009. Following which, application was filed by the assessee requesting BIFR to direct Income Tax Authorities to exempt capital gains tax on the sale of the assets which was to be undertaken as per Modified Rehabilitation Scheme. Later in 2012, the Joint Director of Income Tax rejected the assessee’s request for the exemption of capital gains tax which was based on certain projected figures of expected profits in the future years. Aggrieved by which, the assessee filed the writ petition in the High Court. As the case was pending for decision, meanwhile the assessee filed its Return of Income for A.Y. 2010-11. The Assessment Order was passed for A.Y. 2010-11 without including the Capital gains tax on the transfer of the assets. Following which the Writ Petition was dismissed as infructuous. After the series of events, and in compliance with the direction of the Hon’ble High Court, the Income Tax Authorities rejected the assessee’s request regarding Capital Gains exemption on the basis that the company has the surplus fund available with it as per the latest audited financial statements. Aggrieved by which, the Writ Petition was filed in the High Court.

It was held that the assessee company achieved net worth and moved out of rehabilitation state in 2011. The company’s functioning after rehabilitation indicates that the company has surplus funds but less than half the projected profits with regard to the modified scheme. Hence, the company has shown profitability in the recent years. Therefore, the liability to pay Capital gains tax was upheld while the Revenue was directed not to charge any interest or penalty on such tax in this case for the duration for which the matter remained pending before the Income Tax Authorities.

(Please click here for judgment)


2.  M/s. B&B Infratech Ltd. Vs. ITO, I.T.A. No. 172/2016, Date of Order: 09.11.2016, High Court of Karnataka

Whether the calculation of ‘Book Profit’ for the purpose of tax liability as per the provisions of Section 115JB of the I.T. Act, 1961 can be altered on any subject or item which otherwise is not falling in the explanation to Section 115JB of the Act?

Held: No

Brief Facts:
Assessee has submitted books of accounts showing profit of Rs.43,97,427/-. However, assessee claimed a deduction of Rs.43,00,000/- as capital receipt under the head “other income” and filed “NIL” return of income. During the assessment proceedings, the contention of the AO was that ‘Book Profit’ is defined u/s 115JB of the act and will apply notwithstanding any other provision of the act. There is no scope of any deduction other than as provided by way of explanation u/s 115JB of the Act. The AO ultimately concluded the assessment proceedings by treating the book profit of Rs.43,97,427/- as the income chargeable to tax.

IT was held by the Hon’ble Karnataka High Court that, “The provisions of the Section 115JB of the act has an overriding effect upon other provisions of the said act and when the mechanism or operation of the area is a complete code by itself, any deduction which is otherwise not provided by the explanation would be outside the scope of operation of Section 115JB of the act.”
The appeal of the assessee is denied.

(Please click here for judgment)

III. A Useful Article:

1.  Service tax burden can be passed on by contractual agreement but revenue cannot be asked to wait for recovery of tax dues

(Please click here for detail)

(Contribution by CA. Bimal Jain and contributor is available at eMail-id: 

 Golden Rules:

  "You never know which footstep will bring a good twist in life.
So keep on walking.
Happiness comes when it is most unexpected"


  Thanks & Regards


Voice of CA 

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